Salesforce.com Still Punishing Nonbelievers

Customer relationship management software provider Salesforce.com (CRM[1]) late last week announced upbeat second-quarter results, leading the stock to jump more than 12% on the day.

This trend-follower cult stock has won many battles with short-sellers over the years as it continues to surprise on the upside, leading to short squeezes and new long-only money piling into the stock.

For a little perspective, let’s look at the stock’s longer-term chart before weighing the near-term risk-reward.

Once a rather overlooked stock as recently as late 2008, Salesforce.com has, over the years, turned into a an absolute favorite stock among the trader community. This is particularly so as it continually rewards the buy-the-dip mentality that has once again gotten a good hold on investors.

Unlike other cult stocks — such as Apple (AAPL[2]) during its first-half 2012 vertical leaps — CRM has found a good rhythm of consolidating and retracing its rallies before continuing higher. This does give Salesforce stock a better chance at continuing its uptrend without too catastrophic of a correction.

Note that with last week’s move, the stock has reached a new all-time high, as well as the very upper end of its trading range (black lines).

On the closer-up daily chart of Salesforce.com, we note that last Friday’s move higher was the result of a powerful gap-up and out of a bullish pennant formation. The move was strong enough to gap the stock past the year-to-date highs, closing near the top end of the day’s range. Such powerful moves are not to be faded by my book, although from a pure trading point of view, I would now like to see some consolidation at these all-time highs before playing the stock from the long side.

The bears have been dealt another devastating blow with last week’s rally, making the long-side of the stock still attractive, even if overbought in the immediate-term.

Serge Berger is the head trader and investment strategist for The Steady Trader[3]. Sign up for hisfree Weekly Market Outlook Video here[4]. As of this writing, he did not hold a position in any of the aforementioned securities.